IFRS – Other Considerations
• Canadian-GAAP and IFRS are both largely principles based (vs rules based), meaning that financial reporting is done in the true spirit of assisting users in their understanding of financial reports, as opposed to following strict interpretation of rules. With this in mind, the transition to IFRS is consistent with the overall direction of that Canada has been following with regards to accounting principles.
• Convergence vs adoption. Numerous changes have been made in recent years to convert C-GAAP to IFRS (notably Financial Derivatives, and Inventories), and therefore in Canada, the terminology used to describe IFRS transition is convergence, as opposed to adoption.
• 5 year financial planning – most companies are using 5 year financial forecasts to support their business plans. A key consideration will be to understand the major impacts relating to IFRS implementation, because the 5 year planning horizon will include a combination of C-GAAP and IFRS. Companies to will want to avoid unnecessary, and perhaps costly errors in forecasting due to misinterpretation of accounting standards in the planning process.
• Resource planning and training – Companies will need to focus on staffing for the IFRS project, as well as appropriate training for financial professionals. Furthermore, other stakeholders (banks, investors etc) will need to understand the changes brought about by IFRS. Senior financial people will be called upon to interpret results.
• Financial Reporting system – Companies that has been considering the implementation of a new financial reporting system, would want to review the timing very carefully. Imagine trying to implement IFRS and a new financial reporting system at the same time.
• Private Companies – Absent a decision on standards applicable to Non Publicly Accountable Enterprises (NPAEs), the extent that IFRS is relevant to these enterprises remains unclear. However, since NPAE’s will have the option of utilizing the standards applicable to PAE’s, those choosing to do so may find it to be relevant. Furthermore, consideration of taking the organization public in the future, and other stakeholder requirements, may make IFRS very relevant to private companies.
• Understanding the differences between IFRS vs C-GAAP. The AcSB has issued several excellent documents which provide general and specific guidance. In particular, there is a list of all IFRS and related C-GAAP with explanations of differences etc.